This fourplex on West Fifth Street, constructed with four shipping containers and connected by traditional construction, features three Airbnb rentals and one long-term rental unit.
In late March, Bob Eidson and his team at Emerge Contracting, will debut the latest iteration of the local construction company’s novel shipping container-turned-residential housing concept in Lexington: a modern and minimalist fourplex built on West Fifth Street. The building, constructed from four double-stacked shipping containers connected by traditional construction, contains four high-efficiency apartments. With three of the four units earmarked as full-time Airbnb listings, the new project also embraces what Eidson sees not only as a growing opportunity for his business but also an increasing demand for more flexible rental housing alternatives to satisfy the expanding “sharing economy.”
Bob Eidson
Emerge Contracting has specialized in a variety of single and multi-family infill projects in walkable communities near Lexington’s urban core. In March 2017, the company took its first leap into the Airbnb market, Eidson said, listing one of its downtown units for short-term rental on the popular web-based platform. Within 24 hours, the property had 17 nights booked, he said. In 2018, Emerge converted a few more of its properties to the Airbnb model, pulling in an average $88 per night with an occupancy rate that typically hovers around 70 percent.
The company is now on target to operate 12 Airbnb listings in Lexington by the end of 2019, including nine of its own units and three it manages for others, Eidson said. It is also looking to possibly expand into the Frankfort market. While Airbnb currently focuses on short-term rentals, Eidson thinks a similar model could eventually fill the rental gap between shorter stays and traditional one-year leases.
“I see Airbnb for us not just as a way to augment a property’s income or use,” Eidson said. “I believe it is the way of the future, and that 10 years from now, most leasing will be done on platforms just like Airbnb.”
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Emerge’s Airbnb units are designed to cater to guests needs and interests with stay-like-a-local appeal.
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An evolving market
Airbnb hosts in Fayette County numbered more than 500 and earned a combined $4.8 million in income in 2018, according to Airbnb public affairs representative Ben Breit. The local Airbnb community ushered in roughly 46,000 guest arrivals to the Bluegrass throughout the year.
“The competition is getting stronger in Lexington,” Eidson said. Standing out and offering highly responsive guest services, Eidson said, are keys to doing well with Airbnb rentals.
Emerge's reuse of surplus shipping containers, for example, sparks attention from those interested in sustainability and energy-efficiency, Eidson said—so much so that the company has planned a public open house event at the West Fifth Street property on March 23. But beyond the upcycling intrigue, they have also themed a few of their offerings to add more stay-like-a-local appeal, including one unit that caters to University of Kentucky sports fans. Their most popular themed option, named “Bourbon, Bourbon, Bourbon,” is self-explanatory. “While we don’t provide bourbon as part of the stay, our unit features a small library with books about the history of Kentucky’s signature industry,” said Eidson, who also publishes the Bourbon Review magazine. “For several guests, we have helped to coordinate behind-the-scenes tastings with master distillers.”
About half of his Airbnb clients have a direct or tangential interest in exploring the region’s bourbon industry, Eidson said. Customers also rent the units as temporary housing while their primary local residences undergo renovations, or they may need a place to stay while touring local universities with their college-bound kids. The company has also seen quite a few bookings from traveling health-care professionals with business in Lexington a few days per week, or a few weeks per year, Eidson said.
The new fourplex is Emerge’s first project to peg a majority of its units for Airbnb use, and based on past performance, Eidson estimates that its income will be about 18 percent higher than a more traditionally leased long-term rental property would provide.
Disrupting local lodging?
VisitLEX President Mary Quinn Ramer said growth in recent years for local lodging partners has been relatively steady across the board, which is the norm for Lexington’s historically stable market. The initial rush of inquiries from local property owners looking to dive into Airbnb shortly after the vacation-rental platform launched in 2008 has started to level out, she said.
While Ramer said Airbnb has been a game-changer for the industry in terms of how people view overnight accommodations, she doesn’t see it replacing traditional lodging options completely. “There are many people who will always choose a hotel property or B&B property, but there’s also a section of the population that’s really going to appreciate the Airbnb route,” Ramer said.
“From my perspective, I want us to be a community that welcomes visitors in whatever capacity they’re most comfortable with.”
VisitLEX has worked to educate and assist both existing and potential Airbnb hosts by hosting workshops and providing informational guides on local regulations for short-term rental owners, as well as recommendations and resources about local dining, entertainment and attractions.
Through a tax agreement that took effect last February, Airbnb now collects Fayette County’s 8.5 percent local transient room tax from guests on behalf of the city and remits those payments directly to the Lexington-Fayette Urban County Government. That tax money is allocated by the city to support the work of both VisitLEX and the Lexington Convention Center. Airbnb has also entered into an agreement with the Kentucky Department of Revenue to collect and remit state sales taxes on its Kentucky bookings in a similar manner. Lexington’s local tax agreement with Airbnb was the first one established in the state, Ramer said, and she sees it as a solid first step in the effort to maintain a level playing field for the city’s established hotel and B&B partners.
"I’m not opposed to people opening up their homes to travelers, but I do think they need to be registered and regulated.” — Lyndon House owner Anton Giovanetto
But the playing field is still not level enough, said Anton Giovanetto, innkeeper and owner for the Lyndon House in downtown Lexington for the past 18 years. Local Airbnb operators are not subject to the same litany of health inspections, fire and safety requirements and code enforcement regulations that his bed and breakfast must comply with to operate in Lexington, Giovanetto said. And because the web platform doesn’t fully identify its hosts or their addresses, the system also lacks the transparency needed for any true accountability, he said. “Some people call it the sharing economy; I call it the underground economy,” Giovanetto said. “These hosts aren’t inspected, and they aren’t licensed. …I’m not opposed to people opening up their homes to travelers, but I do think they need to be registered and regulated.”
There is a place for Airbnb options in the local market, said Giovanetto, who added he has worked to encourage more dialogue with the city on the subject. He maintains a presence for Lyndon House on the Airbnb website, as well as other travel sites like Travelocity and Expedia, but mainly for the exposure it provides. Lyndon House serves a niche market of guests who opt for the higher level of service and travel experience that his traditional bed-and-breakfast provides, he added, and price typically isn’t their primary deciding factor.
Because Airbnb’s platform is geared toward maintaining the lowest possible price points in order to boost overall occupancy rates, he said, it does artificially drive down the market for traditional lodging, especially for businesses like his that rely on a higher flow of guests during peak seasons. As a result, Giovanetto says he has seen a roughly 50 percent decline in his business over the past five years.
A new rental frontier
Realtors Dave Alford and Corey Griffo run a local real estate investment company called Griffords. They’ve been experimenting with Airbnb for a triplex on Nicholasville Road, within walking distance to football games at the UK’s Kroger Field, that they purchased and renovated in the fall of 2017. About half of their guests’ visits are tied to the university or local hospitals, they said, and roughly 80 percent of their guests are younger than 40.
“It’s been going strong for five or six months now,” said Alford, adding that they have chalked up about 110 stays since October. “I feel like the number of people who use Airbnb is going to continue to grow.”
Still, it can be a challenging enterprise, Griffo said. Building traffic can be difficult on the guest-focused web platform, which is increasingly driven by established ratings and positive customer reviews, he said. While the Airbnb model can provide 30 to 50 percent more income than a traditional rental would earn, even in the low season, Alford said, the work required to maintain the units and serve the all-hours needs of guests can feel constant and overwhelming at times. The pair plans to continue with Airbnb this year, but in terms of long-term viability, they said they are still weighing the pros and cons. In their work as Realtors with clients looking to buy and sell local real estate, Alford and Griffo said more of their customers are also considering Airbnb income when assessing a potential rental property in the area.
Increased interest in short-term rental options like Airbnb, along with the need to improve density and infill potential in the urban core, has also sparked a push for the city to reconsider its regulations on ADUs, or attached dwelling units. Regulations allowing so-called “tiny homes,” or dwellings smaller than the previously required minimum of 1,200 square feet, has also recently been added to the city’s books.
Finding ways to flexibly and efficiently utilize surplus capacity is what the sharing economy is all about, Eidson said. In the future, signing a shorter 60- or 90-day lease through a web-based exchange will make more sense for a workforce whose lives are no longer defined by full-time, long-term employment with a single company or within a single community, Eidson said.
“The 12-month lease will always have a role, but what we see now is that millennials are informed shoppers who value flexibility and freedom. A 12-month lease for someone who is a contract-gig employee is not attractive,” Eidson said. “We see having flexible housing solutions for that labor force as an opportunity, but I also think it is critical for the economy.”